The governor's budget addresses a $4.6 billion shortfall created by dropping revenue due to the national recession affecting virtually every state across the country, and rising costs to provide basic services such as kindergarten-through-12th grade education and health care.

"The budget I am proposing for the 2011–13 biennium is not a budget I ever expected to see in the state of Washington, and the choices it reflects are the most difficult ones I've ever faced," Gregoire said. "The reality of this recession is that it has dismantled many of the programs that I, and millions of others in the state, value. In any other time I would not sign this budget. It's difficult to support something that goes against all we have accomplished over the past six years. But these are the circumstances we find ourselves in, and we have been left with few options."

Deep cuts are made across all areas of state government. The most significant of these include:

Elimination of the Basic Health Plan, which now offers subsidized health insurance to 66,000 low-income individuals. This saves $230 million in state funds and $117 million in federal funds.

Elimination of the Disability Lifeline grant for the temporarily unemployable, which serves 28,000 individuals each month, and the Disability Lifeline Medical Program, which serves 21,000 clients each year who have a temporary disability and are unable to work. This saves $327 million.

Suspension of the Student Achievement Program under Initiative 728, which provides smaller class sizes, extended learning time for students and professional development for teachers. This saves $860 million.

Suspension of employee salary increases under Initiative 732 for K-12 and higher education teachers and other employees. This saves $280 million.

"The safety net will be stretched thin in some places and eliminated entirely in others," Gregoire said. "For the functions that government no longer will be able to provide, we must turn to neighbors, private charities, faith-based organizations and other local programs. Our communities, more than ever, will be asked to step up."

The budget addresses the shortfall through approximately $3 billion in cuts and $1.1 billion in savings by suspending Initiatives 728 and 732. The balance of the solution is achieved through pension reforms, fund transfers and use of the state's rainy day fund.

The governor's budget requires that government services that benefit a relatively small number of people and businesses, like processing permit applications, be paid for by the beneficiary and not the general public. The budget also requires state agencies to deliver important state services at a lower cost. This includes charging higher fees to visit state parks, obtain fishing and hunting licenses, process water rights applications and license adult family homes. Many actions taken by the governor were advanced by her Transforming Washington's Budget Committee, a group of business, nonprofit and government leaders asked to provide input on how to fundamentally change how the state provides services.

"We must not only cut, we must restructure, modernize, prioritize and position our state as a 21st century government," Gregoire said. "It's not just about this crisis — it's about setting our state on a trajectory that ensures a strong financial foundation for our kids and grandkids. This is a budget that builds the platform for better service and recovery in the years to come."

The governor announced additional transformative reforms earlier in the week, including plans for controlling costs in pensions and health care as well as consolidating central service, natural resource and civil rights offices and agencies. Additional reforms will be announced in early January.